The S&P 500's key support cushions have fallen following a hot CPI, potentially leading the index back to 5000
The S&P 500 fell by around 1.4% following the CPI report, which came in at 3.1% y/y versus median analysts' estimates of 2.9%. The core CPI came in at 3.9%, higher than estimates for 3.7% and in line with December's reading, suggesting the pace of disinflation may have stalled. The CPI report was filled with surprise in January, with the headline to the core to the supercore rising 0.85% during January, its biggest advance since spring 2022.
The USOANM Index sent rates across the curve sharply higher, as the 10-year quickly increased and is back above 4.3%. At this point, where rates go is a big question, as the 10-year should be trading much higher than the 2-year and possibly higher than Fed Funds. However, there is a level of resistance at 4.35%, and if the 10-year gets above 4.35%, it could be off to the races, potentially reaching a 4.7% number soon.
The S&P 500 fell sharply from the rising wedge pattern highlighted in the last few days, but managed to find support and bounce right off the 61.8% retracement level when measuring from the base of the wedge. The target falling out of the wedge should be the 4,850 level, but from a bearish point of view, the index found support and bounced at the 61.8% retracement level.
Nvidia's IV keeps rising, and the 105% moneyness options are trading nearly 1.25% percentage points higher than the 95% moneyness options, which is pretty wide. Given there is still about a week until earnings, the IV will probably go even higher, and who knows, maybe the stock will, too.
Bitcoin's uptrend is unfazed by hot inflation data, with $60K potentially being the next significant increase
Bitcoin has surged above $50,000, despite a temporary slowdown due to hotter-than-expected US inflation data. The robust momentum propelled the demand side to breach the psychological barrier of $50,000 per Bitcoin, despite a temporary slowdown triggered by the strengthening US dollar. This scenario suggests the development of a sustained bull market, driven by the upcoming halving and increased funds flowing into ETFs.
In this ongoing bull market, not only Bitcoin but also other major cryptocurrencies, led by Ethereum, have reached new highs for the year. However, the recent US inflation data indicates that the Federal Reserve cannot yet declare victory, as both key CPI readings exceeded forecasts. The dynamics of services prices, which rose by 0.7% month-on-month, contribute to the persistence of above-target inflation, which discourages the Fed from initiating quick interest rate cuts.
Food prices appear optimistic, with the latest reading indicating a 1.2% year-on-year increase, the lowest since June 2021. Additionally, fuel prices, particularly gasoline (down 14.2% year-on-year) and crude oil (down 6.4% year-on-year), have seen declines.
Bitcoin has already surpassed the $50,000 mark, and ETFs reflecting the spot price of Bitcoin are gaining popularity among investors. The demand generated by the funds is not being matched by the miners, who are only able to generate about 10-15% of the daily demand, which naturally puts demand pressure. If the next psychological barrier is broken, buyers will be one step away from breaking new historical peaks located in the range of $68-69 thousand.
The USD/JPY pair has experienced a three-month peak at 151.00, indicating a potential retreat from the previous high
USD/JPY has reached a new three-month high of 150.87 following the release of US CPI data. The rebound off the 140.20 support is ongoing, indicating a bullish trend in the short-term. Technical oscillators show mixed signals, with the RSI ticking lower near the 70 level and the stochastic oscillator posting a bearish crossover within its %K and %D lines in the overbought area. However, the MACD oscillator remains strong in the bullish mode. If the market rallies further, it may pause its uptrend at the 151.90 resistance level, taken from the peak on November 13. Surpassing this zone could lead to psychological marks such as 152.00 and 153.00, coming from the highs in 1990 at 160.00. On the downside, a downside correction may find support at the 148.80-149.70 restrictive region ahead of the 20- and 50-day simple moving averages (SMAs). The 200-day SMA at 145.17 may act as a turning point for traders.
